2009 (5) TMI 670 - AT - Central Excise

Summary

Issues: Duty demand with interest and penalties, inclusion of scrap value in the value of goods, revenue neutrality, time-barred demand, quantum of wastage, extended time invocation.

In this case, the main issue revolves around a duty demand of Rs. 6,39,799/- with interest and penalties, wherein the applicant, a job worker, received HDPE Granules to manufacture HDPE bags for a company. The applicant returned some manufactured bags made from scrap HDPE to the company but retained and sold the rest of the scrap without informing the authorities. The original authority and the Commissioner (Appeals) held that the value of the scrap retained and sold should be considered as additional consideration and included in the value of the goods, leading to the duty demand.

The advocate for the applicant argued that the Department's adopted wastage quantum was low and even if the scrap value is included in the goods' value, the recipient is eligible for full duty credit, making it revenue neutral. Additionally, they claimed the demand was time-barred due to delayed show cause notice issuance. On the other hand, the Department argued that the value determination was correct, considering the raw material used for wrappers and the undisclosed retention of scrap, justifying the extended time invocation and rejecting the revenue neutrality claim.

Upon considering both sides' submissions, the Tribunal found the value of the retained HDPE granules should be treated as additional consideration, impacting the goods' value. However, there was a dispute regarding the adopted wastage quantum affecting the confirmed duty amount. The Tribunal leaned towards rejecting the time-bar defense due to lack of disclosure by the applicant. To balance revenue interests, the Tribunal directed the applicant to deposit Rs. 2 lacs within eight weeks and waived the pre-deposit of the remaining duty, interest, and penalties pending appeal disposal.

In conclusion, the Tribunal disposed of the application with the aforementioned directives, addressing the duty demand, scrap value inclusion, revenue neutrality, time-barred demand, wastage quantum, and extended time invocation issues comprehensively.